What Is Proxy Tax?
A proxy tax is a tax penalty assessed against organizations that are mostly tax-exempt but may have to pay taxes on funds used to pay for lobbying activities. Organizations potentially subject to a proxy tax include those organized under 501(c)(4), 501(c)(5), and 501(c)(6) of the tax code.1
A proxy tax will be levied against a tax-exempt organization if that organization fails to correctly estimate the amount of money it will spend on lobbying activities in a given year.2 In such a case, the proxy tax rate levied would be the highest marginal corporate tax rate for that tax year.3
